Each one in plain English, with the numbers worked through for a shareholder.
14 Mar 2006financial restatement▼ BadMajor
On March 8, 2006 Parallel concluded that its 2004 annual and several 2004-2005 quarterly financial statements should not be relied on, because its paperwork for treating certain oil, gas and interest rate hedges as cash flow hedges was insufficient for deals made after June 30, 2004. Restated net income is lower: 2004 falls from $5.585 million to $2.271 million, and the March 2005 quarter becomes a $10.704 million loss versus a $550,000 loss reported earlier; retained earnings at September 30, 2005 fall by about $22.8 million. Parallel says covenants will not be breached but has asked lenders for waivers, and a default would occur if the required financial statements are not given to lenders by March 31, 2006 or a waiver is obtained. This is a new problem for the credit facilities set up in late 2005.
18 Jan 2006asset acquisition disposition▲ GoodMajor
On January 12, 2006 Parallel closed the second and final part of the Lynx purchase for $23.4 million, covering about 3.5 million barrels of oil equivalent of proved reserves; the first part closed November 15, 2005 for $20.8 million. Parallel now operates the properties with a 90.0% working interest and 67.5% net revenue interest, funded from its senior revolving credit facility, and the properties are pledged as collateral for both the senior and second-lien loans. This completes the Lynx deal signed in October 2005 and ahead of the January 31, 2006 date that would otherwise have cut the borrowing base by $5.6 million (inference).
On December 23, 2005 Parallel replaced its credit agreement with a Third Amended and Restated one adding four lenders (Compass, Comerica, Bank of Scotland, Fortis). It allows borrowing up to the lesser of $350 million or the borrowing base, now $125 million after the Lynx purchase, and $50 million was outstanding at December 30. The borrowing base drops by $5.6 million if the remaining Lynx properties are not acquired by January 31, 2006. The facility matures October 31, 2010 with margins of 2.00%-2.50% over LIBOR, a 5.00% minimum all-in rate and a $187,500 facility fee, and defaults on the second-lien loan trigger defaults here. This lifts the October 2005 borrowing base of $100 million and supports the Lynx acquisition.
On November 21, 2005 the Compensation Committee set 2006 base salaries and 2005 cash bonuses for executive officers. For example, CEO Larry Oldham gets $300,000 salary and a $175,000 bonus, and Chairman Thomas Cambridge $135,000 and $25,000. Total 2005 bonuses are $487,500 across six officers. Routine pay decisions with no change to the company's business.
21 Nov 2005asset acquisition disposition● NeutralMajor
On November 15, 2005 Parallel closed the first part of the Lynx purchase for $20.8 million, covering about 2.9 million of the 6.4 million barrels of oil equivalent of proved reserves if everything closes, and became operator. To fund it, Parallel took a new $50 million second-lien term loan from BNP Paribas and Citibank Texas, due November 15, 2010 at LIBOR plus 4.50%, with a $750,000 arrangement fee. About $25.7 million repaid revolver debt and $24.3 million is for the remaining Lynx properties. The loan ranks behind the bank credit facility, is secured by second liens, and a default on it triggers a default on the senior facility. A fourth amendment to the credit agreement permitted this. The Lynx deal moves from signed to partly completed, and Parallel's debt rises.
On October 14, 2005 Parallel extended its bank credit facility to October 31, 2010, raised the borrowing base from $90 million to $100 million (next redetermination about April 1, 2006) and cut the interest margin. It also agreed to buy oil and gas properties in Andrews and Gaines Counties, Texas from Lynx Production and nine other sellers for $44.5 million, with Parallel taking a 90% working interest and 67.5% net revenue interest, and becoming operator. Closings run November 15, 2005 to January 15, 2006, funded from the revolver, with the properties pledged as collateral. Parallel also spent $1.5 million on oil price collars (floor $55) covering the purchase. This continues the 2004-05 Andrews/Gaines acquisition strategy and its debt funding.
Nasdaq told Parallel on September 19, 2005 that anti-dilution terms in warrants issued in 2001 to Stonington Corporation (now exercisable for 285,651 shares at $2.84) breached its shareholder-approval rule. On September 20 the warrants were amended to cap exercise at 4,000,000 shares (about 19.9% of shares then outstanding), and on September 21 Nasdaq confirmed compliance and closed the matter. No listing action resulted.
On August 23, 2005 Parallel's board expanded its sale-linked Incentive and Retention Plan by adding 400,000 base shares with a $8.62 base price, on top of the original 1,080,362 shares at $3.73. If the company is sold or control changes, the cash pool paid to officers and employees rises; the filing's example is $10,286,593 at a $12.00 deal price. Parallel says a sale or change of control is only 'possible' and records no liability. The same filing discloses the director option grants already reported on August 25: 50,000 shares each to Chitwood, Poage and Shrader, and 25,000 under each of two plans to Oring, all at $12.27 and vesting over five years from August 23, 2006.
10 June 2005capital raising announcement● NeutralMajor
All holders of the 950,000 outstanding 6% Convertible Preferred shares chose to convert instead of being redeemed for cash on June 6, 2005. They receive about 2.8571 common shares each, around 2,714,280 shares in total, plus $270,750 of accrued dividends. The preferred is no longer outstanding, and existing common holders are diluted by the new shares.
On April 21, 2005 the Compensation Committee gave one-off discretionary cash bonuses of $25,000 each to Thomas R. Cambridge, Larry C. Oldham and Donald E. Tiffin. The filing ties them to recent efforts, including the completed stock offering and plans to speed up development, and says they were not under any plan or agreement.
On April 5, 2005 Parallel and its lenders amended the credit agreement again. The borrowing base is set at $90 million, with the next redetermination around October 1, 2005. The interest margin is reset to 2.25%-2.75% depending on usage, and the cap on certain other investments in 2005 is raised to $4.25 million. This follows the 2004 acquisitions and the earlier December covenant amendment.
On February 3, 2005 Parallel agreed to sell 5,000,000 new common shares through underwriters Jefferies and Sterne Agee at $4.9538 per share to the underwriters, with an initial public price of $5.27. The underwriters have an option on 750,000 more shares. This adds to the share count and so dilutes existing holders. The filing does not say how the proceeds will be used.
Parallel closed 10 more of the follow-on Caprock-area purchases on January 4-5, 2005, for a net price of about $1.52 million (gross $1.71 million), funded from the revolver and pledged as collateral. Its average working interest rises from about 69.8% to about 76.9%, adding roughly 268,000 boe of proved reserves and about 27 boe/d. One of the 28 agreements is still not reported as closed.
Parallel closed 17 of the 27 follow-on purchases of remaining Caprock-area interests on December 30-31, 2004, for a net price of $2.85 million (gross $3.49 million), funded from the revolver. Its average working interest in the properties rises from about 56.6% to about 69.8%, adding roughly 500,000 boe of proved reserves and about 50 boe/d. A 28th agreement was signed December 15, and 11 remaining deals are due to close by January 31, 2005.
Parallel and its lenders loosened the debt-to-EBITDA limit in the September 2004 credit agreement from 3.00 to 3.70 for the quarters through the end of 2005, then 3.60 during 2006 and 3.50 from 2007. The filing gives no reason for the change. (Inference: the limit was relaxed after the debt-funded acquisitions of fall 2004, but the filing does not say so.) The lenders did not waive any default, and the filing says no default exists.
On November 30, 2004 Parallel agreed to buy the remaining interests in the same Andrews and Gaines County properties bought from Caprock and Bunn, from 27 unaffiliated working interest owners, for $5,661,108 before adjustments. If all close, its average working interest rises from about 56.6% to about 80.55%. The interests carry an estimated 909,000 barrels of oil equivalent of proved reserves and about 90 barrels of oil equivalent a day. Closings are due by December 31, 2004, except two by January 31, 2005, subject to conditions. The price is to be funded from the revolver, with the properties pledged as collateral. This extends the Caprock purchase and adds to the debt-funded acquisitions.
20 Oct 2004asset acquisition disposition▲ GoodMajor
Parallel completed the Caprock and Bunn purchases on October 14, 2004, the day before the scheduled closing. Net prices were about $12.87 million for Caprock's properties and about $746,000 for Bunn's, funded from the revolver and pledged as collateral. The properties in Andrews and Gaines Counties, Texas cover about 3,109 net acres and 39 net producing wells, with estimated proved reserves of 2.0 million barrels of oil equivalent and about 200 barrels of oil equivalent a day of production. Parallel's average working interest is 56.6%, and it becomes operator. This resolves the Caprock deal agreed on September 16.
On October 8, 2004 Parallel bought more Fullerton Field interests in Andrews County, Texas from Kaiser-Francis Oil Company for a net price of about $5.63 million, funded from the revolver and pledged as collateral. The deal covers the Lineberry and Grogan leases and lifts Parallel's average working interest in them from 35.3% to 76.5%. It adds about 100 barrels of oil equivalent a day, unhedged, and an estimated 540,000 barrels of oil equivalent of proved reserves. This is a further debt-funded addition to the Fullerton position built since the 2002 acquisition.
1 Oct 2004asset acquisition disposition▲ GoodMajor
Parallel completed the Chevron purchase of Fullerton Field properties in Andrews County, Texas on September 27, 2004. The price was $16,080,470 before adjustments and $15,245,592 after, funded from the revolving credit facility, and the properties were pledged as collateral. Parallel's working interest in these properties rises from 64.125% to 89.125%. The added interests carry an estimated 1.91 million barrels of oil equivalent of proved reserves and about 260 barrels of oil equivalent a day of production. This closes the Chevron deal agreed on September 16 and adds to the debt taken on.
On September 27, 2004 Parallel signed a Second Amended and Restated Credit Agreement with First American Bank, Citibank, BNP Paribas and Western National Bank, replacing the earlier revolver. The borrowing base is $72 million (up from $50 million), with $55 million drawn, and the maturity moves out to December 20, 2008 (from 2006). The facility is secured on substantially all oil and gas properties and has a $300,000 facility fee. A separate commitment letter makes a further $20.5 million available for the Caprock purchase and more Fullerton interests if they are completed by October 31, 2004. The borrowing base would drop by $10 million on April 1, 2005 if all the Caprock properties are acquired. This completes the amendment flagged in the earlier acquisition filings and means the acquisitions are funded with more debt. A change of control is listed as an event of default.
The board adopted an incentive and retention plan on September 24, 2004. It pays cash bonuses to officers and employees if Parallel is sold, merges, sells substantially all its assets or is liquidated, or a retention payment if someone acquires 60% or more of the voting power or the board changes control. The pool is the deal price per share minus $3.73, multiplied by 1,080,362 shares, so a $6.00 deal would give about $2.45m. The filing says Parallel considers such a transaction only 'possible' and has recorded no liability. It does not say a sale is planned.
On September 16, 2004 Parallel agreed to buy producing oil and gas properties in Andrews and Gaines Counties, Texas from Caprock Oil & Gas for $13,146,221, plus $767,933 for related interests held by Bradley W. Bunn, a Caprock affiliate and principal. The deals cover about 3,109 net acres and 39 net producing wells, and Parallel will become operator. Closing was scheduled for October 15, 2004, and the filing says the purchase will be financed from the bank revolver and the properties pledged as extra collateral, with the credit facility being amended to allow it. This is a second debt-funded acquisition announced the same day as the Chevron purchase.
On September 16, 2004 Parallel agreed to buy more producing properties in the Fullerton Field in Andrews County from Chevron for $16,080,470 before adjustments. This adds to the Fullerton properties it bought in 2002, where it already owns a 64.125% working interest. Parallel exercised a preferential right to purchase after Chevron agreed to sell to a third party. Closing was scheduled on or before September 27, 2004. The filing says the price will be drawn from the existing bank revolver, the properties will be pledged as extra collateral, and the lenders are amending the credit facility to allow this.
Parallel reported that proved reserves rose about 15% to 14.8 million barrels of oil equivalent at December 31, 2003, from 12.9 million a year earlier, with 2003 production of about 1.2 million. The company attributes the increase to refracs on the Fullerton properties bought in December 2002, results at its Lion Diamond M project, and East Texas and South Texas gas drilling. The estimated value of proved reserves rose about 20% to roughly $148m from $123m. Management plans about $50m of capital spending over three years (about $17m in 2004), which it expects to fund from operating cash flow and which excludes acquisitions.
Parallel engaged BDO Seidman, LLP as its new independent accountant effective January 20, 2004, on the Audit Committee's recommendation. This fills the gap left when KPMG resigned in December 2003. The filing states Parallel had not consulted BDO on accounting or audit-opinion matters before the engagement.
Auditor KPMG LLP ended its relationship with Parallel on December 2, 2003, resigning because of an independence issue tied to retirement benefits of a former KPMG partner who is also a Parallel director. KPMG's reports for 2001 and 2002 were clean, and the filing states there were no disagreements with Parallel. Parallel now needs a new auditor.
This amendment adds the audited revenue and direct expense figures for the Andrews County (Fullerton) properties Parallel bought on December 20, 2002, which the December 2002 filing said were still to come. Revenues from the properties were $13.48m in 2000, $9.63m in 2001 and $10.13m in 2002, and revenues less direct operating expenses were $11.14m, $6.99m and $7.41m. The deal terms repeat the original filing: $46.075m paid ($45.075m cash plus 454,545 shares), funded by the bank credit facility.
23 Dec 2002asset acquisition disposition● NeutralMajor
On December 20, 2002 Parallel bought 95% of the interest owned by the sellers (JMC Exploration and Arkoma Star) in producing San Andres oil properties in Andrews County, Texas, for $46.075 million: $45.075 million cash and 454,545 Parallel shares valued at $2.20 each. The properties produce about 1,150 barrels of oil equivalent per day net to Parallel, and Parallel's working interest ranges from 22% to 85%. Texland Petroleum bought the other 5% and is named operator, with Parallel co-managing. The cash was borrowed under a revolving credit facility with First American Bank, Western National Bank and BNP Paribas, with a $50 million borrowing base, monthly commitment reductions starting August 31, 2003 and principal due December 20, 2006, secured by substantially all of Parallel's oil and gas properties. This is a major new acquisition after the 2002 First Permian sale, funded by new debt.
22 May 2002asset acquisition disposition▲ GoodMajor
The First Permian sale to Energen closed on April 8, 2002, completing the deal announced in March. Parallel's share, net of its share of First Permian's liabilities, was about $31.6 million, including $6.05 million in cash and 933,589 Energen shares worth $25.58 million at $27.40 per share. The pro forma statements show a one-off gain on the sale and total equity rising from $25.4 million to $44.5 million. Parallel had not decided how to use the cash; it listed working capital, capital spending or paying down bank debt as possibilities.
22 Mar 2002asset acquisition disposition▲ GoodMajor
Parallel owns 30.675% of First Permian, L.L.C., the Permian Basin vehicle formed in 1999 with three other companies to buy Fina's properties for $96.125 million. On March 7, 2002 First Permian agreed to sell all its oil and gas properties to Energen Resources for $120 million cash plus about $70 million of Energen stock. Parallel estimates its share of net proceeds at about $29 million. Closing was expected in early April 2002 and was subject to Energen's due diligence and customary conditions.
